PIL in SC against arbitration on Vodafone in tax dispute case

A former additional solicitor general on Thursday approached the Supreme Court seeking its direction to the Centre to recover around Rs 20,000 crore tax dues from UK telecom major Vodafone and to restrain the government from going ahead with arbitration on the issue.

Bishwajit Bhattacharyya, who deals with tax matters and was a law officer during the UPA regime, mentioned his petition before a vacation bench headed by Justice Vikramajit Sen which posted the case for hearing on July one.

Bhattacharyya submitted that the Centre is not implementing the rule which was amended in 2012 to claim taxes and pleaded to the apex court to intervene in the matter by directing the Centre to administer the Income Tax Act "impartially, even handedly and without fear or favour".

"It amounts to arbitrariness of state action not to enforce law (Section 9 of IT Act) for 27 months after its enactment. This violates Article 14 of the Constitution," the petition said, adding, "Allowing arbitration proceedings under India-Netherland BIPA (Bilateral Investment Protection Agreement) would flagrantly violate rule of law."

He submitted that the IT Act does not recognise conciliation as a dispute settlement mechanism and the tax dispute does not come within the ambit of BIPA.

Recently, the government had appointed former Chief Justice of India R C Lahoti as arbitrator in the tax dispute case.

The government's decision was in response to an arbitration notice served by Vodafone International Holdings BV in April under BIPA for resolving the dispute.

Following the international arbitration notice by Vodafone, the Union Cabinet during the United Progressive Alliance rule had on May 15 approved the withdrawal of a conciliation offer.

The Cabinet had approved the conciliation with Vodafone in June last year in a bid to resolve the capital gains tax dispute related to its 2007 acquisition of Hutchison Whampoa's stake in Hutchison Essar.

While the basic tax demand was Rs 7,990 crore, the total outstanding, including interest and penalty, is estimated to have risen to Rs 20,000 crore.

The Supreme Court had ruled in Vodafone's favour in 2012, saying the company was not liable to pay any tax over the acquisition of assets in India from Hong Kong-based Hutchison.

The government, however, had amended the tax laws with retrospective effect to undo the Supreme Court judgement and claim taxes.